Child Related Tax Breaks

Since we do not have a mortgage, our child is one of the biggest tax breaks we have.   Here are the tax breaks for which we qualify or have qualified:

Dependency -  Our daughter gives us an additional exemption, which reduces our taxable income by $3,800. 

Child tax credit - For one child, we get a child tax credit, which reduces are taxes by $1,000.

Non taxable interest and dividends - Our daughter's savings accounts can earn up to $950 in interest and dividends which won't be taxed.

Adoption tax credit - When we adopted our daughter, we qualified for a tax credit of up to $10,630, which reduced our taxes significantly.  We were able to qualify for most of the credit.

Here are some addition child related tax breaks which we haven't used:

Earned income credit -  This credit is government assistance that is administered through tax returns and can provide over $5000 to lower income families.

Dependent care credit - Parents who use daycare providers can get a tax credit for out of pocket expenses paid.

Employer dependent care assistance - Parents can receive up to $5000 tax free in employer assistance for qualified dependent care costs.

Education tax credits -  Parents of children attending college can receive up to a $2,500 tax credit to offset out of pocket education costs.

Before I was married, I just had mortgage interest and charitable donation deductions.  After getting married, our tax breaks didn't change much.  After adopting our daughter, we receive a one time tax break and three on-going tax breaks.  In the future, we will probably qualify for an education tax credit if it still exists.

For more on Crossing Generations, check back every Thursday  for a new segment.

This is not financial or tax advice advice. Please consult a professional advisor.

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